Correlation Between Oil and Hinopak Motors
Can any of the company-specific risk be diversified away by investing in both Oil and Hinopak Motors at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Oil and Hinopak Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil and Gas and Hinopak Motors, you can compare the effects of market volatilities on Oil and Hinopak Motors and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Oil with a short position of Hinopak Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil and Hinopak Motors.
Diversification Opportunities for Oil and Hinopak Motors
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oil and Hinopak is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and Hinopak Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hinopak Motors and Oil is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Oil and Gas are associated (or correlated) with Hinopak Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hinopak Motors has no effect on the direction of Oil i.e., Oil and Hinopak Motors go up and down completely randomly.
Pair Corralation between Oil and Hinopak Motors
Assuming the 90 days trading horizon Oil is expected to generate 1.14 times less return on investment than Hinopak Motors. But when comparing it to its historical volatility, Oil and Gas is 1.09 times less risky than Hinopak Motors. It trades about 0.19 of its potential returns per unit of risk. Hinopak Motors is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 28,618 in Hinopak Motors on September 2, 2024 and sell it today you would earn a total of 3,465 from holding Hinopak Motors or generate 12.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil and Gas vs. Hinopak Motors
Performance |
| Timeline |
| Oil and Gas |
| Hinopak Motors |
Oil and Hinopak Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil and Hinopak Motors
The main advantage of trading using opposite Oil and Hinopak Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil position performs unexpectedly, Hinopak Motors can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hinopak Motors will offset losses from the drop in Hinopak Motors' long position.The idea behind Oil and Gas and Hinopak Motors pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Hinopak Motors vs. Masood Textile Mills | Hinopak Motors vs. Fauji Foods | Hinopak Motors vs. Mari Petroleum | Hinopak Motors vs. Loads |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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